Influence of accounting disclosures and corporate governance on stock returns of listed firms in Palestine: moderating role of financing constraints

Abstract

Purpose The purpose of this study is to identify the impact of accounting disclosures and corporate governance on stock returns for firms listed on the Palestine Stock Exchange (PEX) during the period from 2014 to 2022. Design/methodology/approach Data from the quarterly reports published to the Palestine Stock Exchange from 2014 to 2022 were used in this analysis. The study makes use of secondary financial data from 52 firms in the insurance, banking, investments, services and manufacturing industries. The study used three-panel regression techniques to assess the research’s assumptions. Findings Our findings suggest that investors and stakeholders do not take accounting disclosures and corporate governance into consideration when evaluating stocks since they have a large and detrimental influence on stock returns. Our findings suggest that firms with financing restrictions would more clearly experience the negative effects of accounting disclosures and corporate governance on stock returns. Research limitations/implications This study has some limitations, including the fact that it only looked at one context and one Middle Eastern country and that its method of obtaining primary data relied primarily on disclosures, corporate governance, financial reports and secondary data. In addition to the fact that there is data that we were not able to collect due to complete confidentiality and non-disclosure. The main limitation is that the sample size of this study is small due to the limited number of listed firms on the (PEX). Practical implications This paper provides some significant managerial implications for policymakers, regulators and investors. The regulatory agencies, authorities, businesses and investors can benefit from the management implications of this study. Accounting disclosure activities and corporate governance could have benefits. These procedures still need to be effectively incorporated into stock valuations. Government agencies should require businesses to reveal more complex information while lowering the percentage of indirect data they provide. Originality/value This study provides significant insights and implications for regulatory authorities, decision-makers and investors. This study contributes to the literature by evaluating the link between accounting disclosures and corporate governance and stock returns and determining if this relationship is subject to financing restrictions using a database of Palestinian firms registered on the (PEX). Governance indicators and accounting disclosures have a significant increase in the application of governance elements in companies listed on the (PEX) during the study period, which indicates that accounting disclosures and corporate governance have a strong impact on stock returns.

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